KUALA LUMPUR, April 30 — AmBank expects the United States Federal Reserve (US Fed) to keep the interest rates at the current levels of 0-0.25 per cent until 2022-2023.
The bank said the US Fed yesterday held its key interest rate near zero and vowed to continue taking aggressive action to combat the effects of a COVID-19 pandemic that has set off an unprecedented economic downturn.
“The central bank aims to keep rates at a range of zero to 0.25 per cent until the economy weathers the current storm with unemployment getting back on track and inflation goals achieved. We expect the Fed to keep rates at current levels until 2022-2023,” it said in a research note today.
AmBank said the US Fed projected the US' first quarter 2020 (Q1 2020) annualised gross domestic product (GDP) to contract by 4.8 per cent, the first decline since 2014 and the steepest since late 2008.
“But the brutal showing will likely be dwarfed by a projected 30-40 per cent output drop in the current quarter, the largest in modern history.
However, it said the US Fed forecast is stronger than its projection of six per cent contraction in the US first quarter 2020 (Q1 2020) annualised GDP while output drop is forecasted at 35 per cent.
AmBank Research said assuming the Covid-19 pandemic continued to ebb and more businesses reopen by summer, the economy would mount a strong recovery in the second half of 2020.
But consumers are likely to remain wary that will keep the economy from returning to its pre-pandemic output level until late 2021, it said.
“We project the US GDP would grow around negative 5.0 per cent in 2020 and 3.5 per cent in 2021,” it said. — Bernama
